OPSM 302

SERVICE OPERATIONS
MANAGEMENT
Fall 2022
Selçuk Karabatı
INTRODUCTION
What Is Operations
Management?

• Production is the creation of goods and

delivery of services

• Operations Management (OM) is the

management of the set of activities that create
value in the form of goods and services by
transforming inputs into outputs

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Organizing to Produce Goods
and Services
• Essential functions:
1. Marketing – generates demand
2. Operations – creates the product,
delivers the service
3. Finance/Accounting – tracks how well
the organization is doing, pays bills,
collects the money

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Route to the Top (2021)

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Route to the Top (2021)

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Fruits of Good Operations:
Your Career (2021)

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Fruits of Good Operations:
Your Career (2021)

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OM and
Management Consulting

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University Academic Council
Decision (March 10, 2017)

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Administrative Details
• Blackboard: ku.blackboard.com
• Syllabus

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 A Process Management
Perspective
• We all manage processes...
Process
Information Management
structure

Network of
Activities and Buffers
Inputs Outputs
Flow units Goods
(customers, data,
material, cash, etc.) Services

Labor & Capital

Resources

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Process Management
• A business process is a network of activities performed
by resources that transforms inputs into outputs…

• Process Management is a set of managerial policies

specifying how a process should be operated over time...

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“Products”
• Products are the desired set of process outputs
• Product Types
• Goods versus Services
• Product Attributes
• Cost
• Delivery response time
• Variety
• Quality

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 Inputs-Outputs
• Tangible Inputs
• People
• Raw material
• Intangible Inputs
• Information
• Time
• Tangible Outputs
• Buildings
• Cars
• Intangible Outputs
• Outgoing patient (hospital)
• Delivered message (advertising company)

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Transformations
• Physical Manufacturing

• Locational Transportation

• Exchange Retailing

• Storage Warehousing

• Physiological Health care

• Informational “Telecommunications”

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 All Managers are Operations Managers!
• All managers must transform inputs into outputs
• Example: Accounting Manager
• Inputs: data, information, labor
• Transformation: application of accounting principles and knowledge
• Outputs: accounting reports, knowledge of performance, ...

• Therefore, all managers are in some sense Operations

Managers
• All managers have an “operation” to run

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Service Definitions
Services are deeds, processes, and performances.
Valarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible

experience performed for a customer acting in
the role of a co-producer.
James Fitzsimmons

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Role of Services in an
Economy

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Typology of Services

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Stages of Economic
Development

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Percent Employment in Services
(Top Ten Nations in 2019)

https://data.worldbank.org/indicator/SL.SRV.EMPL.ZS

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Trends in
Employment by Sector (U.S.A.)

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Trends in
Employment by Sector (Turkey)

• “İșgücü İstatistikleri” @ tuik.gov.tr

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COVID-19 Challenges
• Restrictions on social-distancing and large indoor gatherings create a
service-dominated recession
• The past growth of service sector employment at the expense of
manufacturing has, under COVID-19 restrictions, made labor-market
recovery slower
• This factor is partly owing to manufacturing ability to continue
production and build inventories in anticipation of future demand
recovery
• The crisis has exposed fundamental shortcomings in pandemic
preparedness, socio-economic safety nets, and global cooperation
• Governments, health care institutions, and businesses have struggled
to address compounding repercussions in the form of workforce
challenges, disruptions in essential supplies, and social instability

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Economic Evolution

Welcome to the Experience Economy, B. Joseph Pine II and James H. Gilmore, HBR July–August 1998

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The Four Realms of a
Service Experience

Absorption occupies a person's attention,

but immersion requires the participants to
go into and include themselves in
the experience.

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Distinctive Characteristics of
Services
• Customer Participation in the Service Process
• Simultaneity
• Perishability
• Intangibility
• Heterogeneity
• Nontransferable Ownership

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Non-Ownership Classification
of Services

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Implications of Rental/Usage
Paradigm
• Creates the option of renting a good upon demand
rather than purchase
• Service often involves selling slices of larger physical
entities
• Labor and expertise are renewable resources
• Time plays a central role in most services
• Service pricing should vary with time and availability

Question: Can services in general be described as

customers sharing resources?

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Service Package

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The Service Package
• Supporting Facility: The physical resources that must be in place
before a service can be sold. Examples are golf course, ski lift,
hospital, airplane.
• Facilitating Goods: The material consumed by the buyer or items
provided by the consumer. Examples are food items, replacement
parts, golf clubs, medical supplies.
• Information: Operations data or information that is provided by
the customer to enable efficient and customized service. Examples
are patient medical records, database records about the seats
available on a flight, customer preferences, location of customer to
dispatch a taxi.

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The Service Package (cont.)
• Explicit Services: Benefits readily observable by the senses. The
essential or intrinsic features. Examples are quality of meal, attitude
of the waiter, on-time departure.
• Implicit Services: Psychological benefits or extrinsic features
which the consumer may sense only vaguely. Examples are privacy
of loan office, security of a well lighted parking lot.

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 The Service Process Matrix
The Ability of Customer to Affect the
Nature of the Service Being Delivered

Ratio of
Labor Cost
to Capital
Cost

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Managerial Challenges

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 Open Systems View of Services:
The Process is the Product
Open System:
Full impact of
demand variations
is transmitted to
the system

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Interactive Class Exercise
The class breaks into small groups. Each group chooses one company
which can be considered mainly a “manufacturing” company from the list
of “500 Largest Turkish Companies” of fortuneturkey.com.
http://www.fortuneturkey.com/fortune500
1. List your company’s possible “service” offerings to “add value” for
the customer.
2. Can this company be part of an “experience economy”?

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